Your Letters: Wage Shock

First off, let me share that I have immense respect for both Professors Tommy Koh and Lim Chong Yah, especially the latter whose textbooks were synonymous with our JC journeys into the world of economics.

In the world of economics, we all know that there is one thing very crucial in order to get that A in exams – assumptions. Before any arguments can be put forth, we have to state our assumptions. Assume there is perfect competition… Assume there are only 2 manufacturers… Assume the government can set price floor… Etc. In short, theoretical assumptions are paramount in economics arguments.

Now, let’s look at 2 aspects of Prof Lim CY’s shock therapy thesis, as well as Prof Koh’s strident defense of it. The 2 professors support giving all low wage workers a year-on-year increment of $50 for 3 years. In theory, this makes a lot of sense, since it is a direct intervention to making the workers’ lives better. But how do we do this? The 2 good professors do not say. Not by law, as that would be like minimum wage which Prof Lim already publicly denounced. By moral persuasion? Can be done, assuming a world of employers very conscious of their moral obligations.This assumption is a very powerful one, as it covers everyone from coffeeshop owners, to KTV owners, to the 3 man SME at Paya Lebar to the 1000 employee MNC at AMK industrial hub. In other words, theoretically easy, not so straightforward in practice.

The other theory was to limit the top earners salary over the next few years. Impose an earnings cap on those making $15k a month. How? Not by law, as that is too onerous and would be seen as legal robbery. Again, the only way to make it work is to assume that top earners see moral obligation as their path to self-actualization, never mind the mortgage or household bills to be paid.

I live in a real world. I can see the theoretical sexiness of Prof Lim’s theories and why so many support them. But I know, and the good professor has admitted very much so as well in public, that the theories are only that, theories. They are probably impossible to implement at all. So perhaps we should remember that Prof Lim himself said so, sharing that his theories merely seek to probe us into thinking more about the matter, and are not meant to solve the problems.

So let us work on solutions that can be implemented, and not pretend that the whole world is sitting for our GCE A levels economics exam.